Your personal experiences with money make up maybe 0.00000001% of what's happened in the world, but maybe 80% of how you think the world works.
To make money they didn’t have and didn’t need, they risked what they did have and did need. And that’s foolish. It is just plain foolish. If you risk something that is important to you for something that is unimportant to you, it just does not make any sense.
$81.5 billion of Warren Buffett’s $84.5 billion came after his 65th birthday. Our minds are not built to handle such absurdities.
There are books on economic cycles, trading strategies, and sector bets. But the most powerful and important book should be called Shut Up And Wait. It’s just one page with a long-term chart of economic growth.
Sandler said he was told by Mrs. Germansky that a friend saw her husband late Thursday on Wall Street near the stock exchange. According to her informant, her husband was tearing a strip of ticker tape into bits and scattering it on the sidewalk as he walked toward Broadway.
A great many smashes by brilliant men can be traced directly to the swelled head.
I had a day job in midtown Manhattan paying $20k per year—about minimum wage ... I never ate out, and never took a taxi. My cost of living was about 1000/month, and I was earning $1800/month. I did this for two years, and saved up $12,000. I was 22 years old. Once I had $12,000 I could quit my job and become a full-time musician. I knew I could get a few gigs per month to pay my cost of living. So I was free. I quit my job a month later, and never had a job again. When I finished telling my friend this story, he asked for more. I said no, that was it. He said, “No, what about when you sold your company?” I said no, that didn’t make a big difference in my life. That was just more money in the bank. The difference happened when I was 22.
More of us have jobs that look closer to Rockefeller than a typical 1950s manufacturing worker, which means our days don’t end when we clock out and leave the factory. We’re constantly working in our heads, which means it feels like work never ends.
If your job is to build cars, there is little you can do when you’re not on the assembly line. You detach from work and leave your tools in the factory. But if your job is to create a marketing campaign—a thought-based and decision job—your tool is your head, which never leaves you. You might be thinking about your project during your commute, as you’re making dinner, while you put your kids to sleep, and when you wake up stressed at three in the morning. You might be on the clock for fewer hours than you would in 1950. But it feels like you’re working 24/7.
It was my dream to have one of these cars of my own, because (I thought) they sent such a strong signal to others that you made it. You’re smart. You’re rich. You have taste. You’re important. Look at me. The irony is that I rarely if ever looked at them, the drivers. When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Subconscious or not, this is how people think. There is a paradox here: people tend to want wealth to signal to others that they should be liked and admired. But in reality those other people often bypass admiring you, not because they don’t think wealth is admirable, but because they use your wealth as a benchmark for their own desire to be liked and admired.
I learned that as a valet, when I began thinking about all the people driving up to the hotel in their Ferraris, watching me gawk. People must gawk everywhere they went, and I’m sure they loved it. I’m sure they felt admired. But did they know I did not care about them, or even notice them? Did they know I was only gawking at the car, and imagining myself in the driver’s seat?
When most people say they want to be a millionaire, what they might actually mean is “I’d like to spend a million dollars.” And that is literally the opposite of being a millionaire.
Jack Bogle, the late founder of Vanguard, spent his career on a crusade to promote low-cost passive index investing. Many thought it interesting that his son found a career as an active, high-fee hedge fund and mutual fund manager. Bogle—the man who said high-fee funds violate “the humble rules of arithmetic”—invested some of his own money in his son’s funds. What’s the explanation? “We do some things for family reasons,” Bogle told The Wall Street Journal. “If it’s not consistent, well, life isn’t always consistent.”
Whenever we are surprised by something, even if we admit that we made a mistake, we say, ‘Oh I’ll never make that mistake again.’ But, in fact, what you should learn when you make a mistake because you did not anticipate something is that the world is difficult to anticipate. That’s the correct lesson to learn from surprises: that the world is surprising.
That doesn’t mean we should ignore history when thinking about money. But there’s an important nuance: The further back in history you look, the more general your takeaways should be. General things like people’s relationship to greed and fear, how they behave under stress, and how they respond to incentives tend to be stable in time. The history of money is useful for that kind of stuff. But specific trends, specific trades, specific sectors, specific causal relationships about markets, and what people should do with their money are always an example of evolution in progress. Historians are not prophets.
“the purpose of the margin of safety is to render the forecast unnecessary.”
When forced to choose, I will not trade even a night’s sleep for the chance of extra profits. - Buffett
Every five-year-old boy wants to drive a tractor when they grow up. Few jobs look better in the eyes of a young boy whose idea of a good job begins and ends with “Vroom vroom, beep beep, big tractor, here I come!” Then many grow up and realize that driving a tractor maybe isn’t the best career. Maybe they want something more prestigious or lucrative.
“All of us,” he said, “are walking around with an illusion—an illusion that history, our personal history, has just come to an end, that we have just recently become the people that we were always meant to be and will be for the rest of our lives.” We tend to never learn this lesson. Gilbert’s research shows people from age 18 to 68 underestimate how much they will change in the future.
The next thing you know, Kahneman sends a version so utterly transformed that it is unrecognizable: It begins differently, it ends differently, it incorporates anecdotes and evidence you never would have thought of, it draws on research that you’ve never heard of. “When I asked Danny how he could start again as if we had never written an earlier draft,” Zweig continued, “he said the words I’ve never forgotten: ‘I have no sunk costs.’”
When a commentator on CNBC says, “You should buy this stock,” keep in mind that they do not know who you are. Are you a teenager trading for fun? An elderly widow on a limited budget? A hedge fund manager trying to shore up your books before the quarter ends? Are we supposed to think those three people have the same priorities, and that whatever level a particular stock is trading at is right for all three of them?
Optimism is the best bet for most people because the world tends to get better for most people most of the time. But pessimism holds a special place in our hearts. Pessimism isn’t just more common than optimism. It also sounds smarter. It’s intellectually captivating, and it’s paid more attention than optimism, which is often viewed as being oblivious to risk.
Before we go further we should define what optimism is. Real optimists don’t believe that everything will be great. That’s complacency. Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way. The simple idea that most people wake up in the morning trying to make things a little better and more productive than wake up looking to cause trouble is the foundation of optimism. It’s not complicated. It’s not guaranteed, either. It’s just the most reasonable bet for most people, most of the time. The late statistician Hans Rosling put it differently: “I am not an optimist. I am a very serious possibilist.”
Imagine if a Japanese academic had written a newspaper article during this time that said:
Chin up, everyone. Within our lifetime our economy will grow to almost 15 times the size it was before the end of the war. Our life expectancy will nearly double. Our stock market will produce returns like any country in history has rarely seen. We will go more than 40 years without ever seeing unemployment top 6%. We will become a world leader in electronic innovation and corporate managerial systems. Before long we will be so rich that we will own some of the most prized real estate in the United States. Americans, by the way, will be our closest ally and will try to copy our economic insights.
They would have been summarily laughed out of the room and asked to seek a medical evaluation. Keep in mind the description above is what actually happened in Japan in the generation after the war. But the mirror opposite of Panarin looks absurd in a way a forecast of doom doesn’t. Pessimism just sounds smarter and more plausible than
optimism.
If a smart person tells me they have a stock pick that’s going to rise 10-fold in the next year, I will immediately write them off as full of nonsense.
If someone who’s full of nonsense tells me that a stock I own is about to collapse because it’s an accounting fraud, I will clear my calendar and listen to their every word.
One is that money is ubiquitous, so something bad happening tends to affect everyone and captures everyone’s attention.
That isn’t true of, say, weather. A hurricane barreling down on Florida poses no direct risk to 92% of Americans. But a recession barreling down on the economy could impact every single person—including you, so pay attention
Growth is driven by compounding, which always takes time. Destruction is driven by single points of failure, which can happen in seconds, and loss of confidence, which can happen in an instant. It’s easier to create a narrative around pessimism because the story pieces tend to be fresher and more recent. Optimistic narratives require looking at a long stretch of history and developments, which people tend to forget and take more effort to piece together.
Growth is driven by compounding, which always takes time. Destruction is driven by single points of failure, which can happen in seconds, and loss of confidence, which can happen in an instant. It’s easier to create a narrative around pessimism because the story pieces tend to be fresher and more recent. Optimistic narratives require looking at a long stretch of history and developments, which people tend to forget and take more effort to piece together.
nah bro stealing from earlier sections how we quoting the same book this is worse than zizek autoplagiarism